IDEAS home Printed from https://ideas.repec.org/a/eee/exehis/v65y2017icp55-67.html
   My bibliography  Save this article

Monopsony and competition: The impact of rival leagues on player salaries during the early days of baseball

Author

Listed:
  • Bradbury, John Charles

Abstract

During the early days of professional baseball, the dominant major leagues imposed a “reserve clause” designed to limit player wages by restricting competition for labor. Entry into the market by rival leagues challenged the incumbent monopsony cartel's ability to restrict compensation. Using a sample of player salaries from the first 40 years of the reserve clause (1880–1919), this study examines the impact of inter-league competition on player wages. This study finds a positive salary effect associated with rival league entry that is consistent with monopsony wage suppression, but the effect is stronger during the 20th century than the 19th century. Changes in levels of market saturation and minor-league competition may explain differences in the effects between the two eras.

Suggested Citation

  • Bradbury, John Charles, 2017. "Monopsony and competition: The impact of rival leagues on player salaries during the early days of baseball," Explorations in Economic History, Elsevier, vol. 65(C), pages 55-67.
    • Handle: RePEc:eee:exehis:v:65:y:2017:i:c:p:55-67
    DOI: 10.1016/j.eeh.2017.01.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014498317300116
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eeh.2017.01.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Walter C. Neale, 1964. "The Peculiar Economics of Professional Sports," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(1), pages 1-14.
    2. Douglas O. Staiger & Joanne Spetz & Ciaran S. Phibbs, 2010. "Is There Monopsony in the Labor Market? Evidence from a Natural Experiment," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 211-236, April.
    3. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    4. Krautmann, Anthony C, 1999. "What's Wrong with Scully-Estimates of a Player's Marginal Revenue Product," Economic Inquiry, Western Economic Association International, vol. 37(2), pages 369-381, April.
    5. Scully, Gerald W, 1974. "Pay and Performance in Major League Baseball," American Economic Review, American Economic Association, vol. 64(6), pages 915-930, December.
    6. Simon Rottenberg, 1956. "The Baseball Players' Labor Market," Journal of Political Economy, University of Chicago Press, vol. 64(3), pages 242-242.
    7. Jennifer K. Ashcraft & Craig A. Depken, 2020. "The introduction of the reserve clause in Major League Baseball: evidence of its impact on select player salaries during the 1880s," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 14(1), pages 105-128, January.
    8. XiaoGang Che & Brad Humphreys, 2015. "Competition Between Sports Leagues: Theory and Evidence on Rival League Formation in North America," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(2), pages 127-143, March.
    9. Hirsch, Barry T. & Schumacher, Edward J., 2005. "Classic or new monopsony? Searching for evidence in nursing labor markets," Journal of Health Economics, Elsevier, vol. 24(5), pages 969-989, September.
    10. Paul M. Sommers & Noel Quinton, 1982. "Pay and Performance in Major League Baseball: The Case of the First Family of Free Agents," Journal of Human Resources, University of Wisconsin Press, vol. 17(3), pages 426-436.
    11. Cain, Louis P. & Haddock, David D., 2005. "Similar Economic Histories, Different Industrial Structures: Transatlantic Contrasts in the Evolution of Professional Sports Leagues," The Journal of Economic History, Cambridge University Press, vol. 65(4), pages 1116-1147, December.
    12. Eckard, E. Woodrow, 2005. "Team promotion in early major league baseball and the origin of the closed sports league," Explorations in Economic History, Elsevier, vol. 42(1), pages 122-152, January.
    13. Michael Haupert & James Murray, 2012. "Regime switching and wages in major league baseball under the reserve clause," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 6(2), pages 143-162, May.
    14. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(6), pages 814-823, December.
    15. Lawrence M. Kahn, 2000. "The Sports Business as a Labor Market Laboratory," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 75-94, Summer.
    16. Alan Manning & Ted To, 2002. "Oligopsony and Monopsonistic Competition in Labor Markets," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 155-174, Spring.
    17. Jordan D. Matsudaira, 2014. "Monopsony in the Low-Wage Labor Market? Evidence from Minimum Nurse Staffing Regulations," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 92-102, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jennifer K. Ashcraft & Craig A. Depken, 2020. "The introduction of the reserve clause in Major League Baseball: evidence of its impact on select player salaries during the 1880s," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 14(1), pages 105-128, January.
    2. Jyh-How Huang & Yu-Chia Hsu, 2021. "A Multidisciplinary Perspective on Publicly Available Sports Data in the Era of Big Data: A Scoping Review of the Literature on Major League Baseball," SAGE Open, , vol. 11(4), pages 21582440211, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pelnar, Gregory, 2007. "Antitrust Analysis of Sports Leagues," MPRA Paper 5382, University Library of Munich, Germany.
    2. Austan Goolsbee & Chad Syverson, 2023. "Monopsony Power in Higher Education: A Tale of Two Tracks," Journal of Labor Economics, University of Chicago Press, vol. 41(S1), pages 257-290.
    3. Jahn K. Hakes & Chad Turner, 2008. "Long-Term Contracts in Major League Baseball," Working Papers 0831, International Association of Sports Economists;North American Association of Sports Economists.
    4. Wladimir Andreff, 2009. "Équilibre compétitif et contrainte budgétaire dans une ligue de sport professionnel," Revue économique, Presses de Sciences-Po, vol. 60(3), pages 591-633.
    5. Dietl Helmut M & Duschl Tobias & Lang Markus, 2011. "Executive Pay Regulation: What Regulators, Shareholders, and Managers Can Learn from Major Sports Leagues," Business and Politics, De Gruyter, vol. 13(2), pages 1-32, August.
    6. Helmut Dietl & Tobias Duschl & Markus Lang, 2010. "Gehaltsobergrenzen und Luxussteuern: Erkenntnisse aus dem professionellen Mannschaftssport," Working Papers 0136, University of Zurich, Institute for Strategy and Business Economics (ISU).
    7. John Charles Bradbury, 2013. "What Is Right With Scully Estimates of a Player’s Marginal Revenue Product," Journal of Sports Economics, , vol. 14(1), pages 87-96, February.
    8. John Charles Bradbury, 2019. "Determinants Of Revenue In Sports Leagues: An Empirical Assessment," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 121-140, January.
    9. R. Antonietti, 2006. "Human Capital, Sport Performance, and Salary Determination of Professional Athletes," Working Papers 561, Dipartimento Scienze Economiche, Universita' di Bologna.
    10. Roger D. Blair & Brad R. Humphreys & Hyunwoong Pyun, 2017. "Monopsony Exploitation in Professional Sport: Evidence from Major League Baseball Position Players, 2000–2011," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(5), pages 676-688, July.
    11. David J. Berri & Martin B. Schmidt & Stacey L. Brook, 2004. "Stars at the Gate," Journal of Sports Economics, , vol. 5(1), pages 33-50, February.
    12. Scott M. Kaplan, 2022. "Putting a price on popularity: Evidence from superstars in the National Basketball Association," Economic Inquiry, Western Economic Association International, vol. 60(3), pages 1357-1381, July.
    13. Stephen Shmanske, 2007. "Book Review: Handbook of Sports Economics Research, edited by John Fizel. Armonk, NY: M. E. Sharpe, 2005. 288 pp," Journal of Sports Economics, , vol. 8(6), pages 675-677, December.
    14. Stefan Szymanski, 2003. "The Assessment: The Economics of Sport," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(4), pages 467-477, Winter.
    15. David J. Berri & John Charles Bradbury, 2010. "Working in the Land of the Metricians," Journal of Sports Economics, , vol. 11(1), pages 29-47, February.
    16. Jennifer K. Ashcraft & Craig A. Depken, 2020. "The introduction of the reserve clause in Major League Baseball: evidence of its impact on select player salaries during the 1880s," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 14(1), pages 105-128, January.
    17. John D. Burger & Stephen J. K. Walters, 2003. "Market Size, Pay, and Performance," Journal of Sports Economics, , vol. 4(2), pages 108-125, May.
    18. Michael Lewis & Yeujun Yoon, 2018. "An Empirical Examination of the Development and Impact of Star Power in Major League Baseball," Journal of Sports Economics, , vol. 19(2), pages 155-187, February.
    19. Di Domizio Marco, 2008. "Win the best, win the largest or win the richest. Some empirical evidence from Italian championships," wp.comunite 0047, Department of Communication, University of Teramo.
    20. Helmut Dietl & Egon Franck & Markus Lang, 2008. "Why football players may benefit from the ‘shadow of the transfer system’," European Journal of Law and Economics, Springer, vol. 26(2), pages 129-151, October.

    More about this item

    Keywords

    Monopsony; Marginal revenue product; Baseball; Competition;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913
    • Z2 - Other Special Topics - - Sports Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:exehis:v:65:y:2017:i:c:p:55-67. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622830 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.